Property rights and investment: the mediating effect of contract enforcement

What is it about?

The purpose of this paper is to empirically test whether enforceability mediates the relationship between property rights and investment in housing, using data from land formalization project in Addis Ababa, Ethiopia. The results indicate statistically significant mediation effect of contract enforcement. However, the mediation is partial, there is still a substantial direct effect on the security of property rights on investment.

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Why is it important?

Any initiative to land formalization projects needs to consider contract enforcement environment, as presence and size of property rights effects largely depend on whether those rights are properly enforced. This is the first study that conceptualizes the mediating effect of contract enforcement on the relationship between property rights and investment from an African country perspective.